The Impact of the Supply Chain on Manufacturing

March 24, 2021 | American Manufacturing

The images of empty shelves at the start of the Covid-19 pandemic are likely etched in most of our minds. When most of us were trying to limit our trip into stores, efforts to get high demand goods, like cleaners and toilet paper, highlighted for many Americans exactly how fragile the supply chain could be. For many Americans, the last two years have included a crash course in supply chains and how easily a major world event can impact that crucial part of our economy.

Over the first few months of the pandemic, we slowly saw some products return to shelves, while others were slower to restock and even when they were, they quickly flew off the shelves. This demonstrated yet another aspect of the supply chain. Not only could world events impact that chain, but increased demand, especially when unpredictable or when the chain has already been disrupted, can further rock a ship seeking to steady itself.

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How Does the Supply Chain Work

Before moving into a deeper look at how supply chain issues have impacted American manufacturing and the impact the shortages have had on many companies across the world, it’s important to understand exactly what the supply chain is and how it works.

In short, the supply chain is the connection, or chain, between the producers of raw materials, who pass along their product to manufacturers, who then provide their goods or parts to other manufacturers or end users or consumers.

At any point in that chain, a disruption, such as limited raw materials or other resources, such as workers, can significantly impact production. Similarly, issues in transportation can cause problems as raw materials or products cannot be delivered to the next link in the chain. We sometimes see this with hurricanes and massive storms or natural disasters in places that provide raw materials or products to other industries.

How Does the Supply Chain Impact American Manufacturing

A lot of time and effort goes into managing supply chain logistics. Industries and companies utilize software and applications, analyzing data and markets, demand and production, all to ensure a steady flow of materials and products coming to and exiting from their respective businesses. As noted above, one failure in that chain impacts everyone else.

Similarly, understanding and being able to predict supply chains is a cost saving measure for companies and consumers as well. When manufacturers can control their costs, by efficiently managing inventory, they can pass that savings on to their customers. On the other hand, when competing with other manufacturers for a limited supply, that competition is passed on to everyone else in either cost, or time, or lack of supply, all of which impact the bottom line.

Supply Chains in the Midst of Covid

At the start of the 2020, the supply chain shock was just a ripple that would soon become a giant wave. Any products or raw materials coming from China hit a standstill and manufacturers and stores relying on those goods scrambled to adjust. This decrease in supply was just the beginning of the supply chain problems. In fact, 21% of manufacturers reported experiencing disruptions.

As mentioned, the supply chain is a bit more complex than that; it’s not just about supply, it’s also about demand. The ripple had already grown to a wave and the supply chain tsunami really struck when consumers started stockpiling goods. Products that were typically fairly predictable in terms of supply and demand became volatile and weeks worth of supplies were swept off the shelves in days.

The consumer example is a great way to understand the larger picture as well. The same experience consumers had at the stores, manufacturers had with their suppliers. There were multiple disruptions resulting in significant shortages. In turn, manufacturers scrambled to find alternative suppliers (remember those out of the way stores that had toilet paper when no one else did? Like that) until even those saw the increased demand disrupt their once reliable supply. 

To be clear, the consequences of supply chain disruption on a business can be significant and include:

Financial impact- In terms of lost business, the financial impact would be felt by everyone, particularly when there were price adjustments for low supply.

Transportation issues- As supplies stabilized, producers and manufacturers were eager to get products out and shipped. Some saw increases in transportation costs, while others had difficulty in shipping and delivering items quickly because of the strain on the transportation industry, a vital piece of the supply chain.

Fulfillment delays and reputational impacts- Obviously, because of low supplies of goods, many companies had a hard time delivering the products and goods their customers needed. In turn, that may have impacted the customer’s view of the company, forcing them to, in some cases, turn to other companies. Reliability is a key component of building one’s business, especially in manufacturing, and the impact of this will be felt by many companies for years to come.

The American Manufacturing Comeback

As the world begins to return to pre-covid production and consumption, demand for goods is increasing, in what would typically be a fairly healthy, even robust, manner. However, the supply chain hasn’t fully righted itself.

In a recent interview with NPR, Marlin Steel CEO Drew Greenblatt noted that while the economy is “snapping back in a big way,” supply chain issues were still impacting manufacturing’s ability to respond to the demand. In fact, demand for consumer goods grew 6% in January and that demand has manufacturers across multiple industries scrambling to provide for customers. The NPR piece also notes that manufacturing activity is expanding, but shortages are thwarting that explosive growth.

However, it’s expected that things will stabilize by late summer or fall, as more workers are vaccinated and labor shortage issues, which add to supply chain friction, are resolved. Still, the important factor to focus on here is the incredible growth being seen in manufacturing while other sectors are still struggling. It means demand is high as are hopes for not just recovery, but explosive growth.

Marlin Steel prides itself on delivering for its customers and providing the best stainless steel products for a variety of industries. They are working hard on fulfilling orders and meeting demands, riding out the wave that started as a ripple. If you’d like to talk to their team about  custom made stainless steel products, get in touch with them today!
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